Honda Motor Co. will build a second car plant in Thailand and a new motorcycle factory in Vietnam as well as boosting capacity in other regions to meet growing demand abroad even as the Japanese market shrinks.

Japan's second-biggest automaker has been busy trying to fill orders for its small, fuel-efficient cars such as the Fit/Jazz and Civic in the United States and elsewhere, and has forecast global car sales will exceed last year's record 3.55 million units.

On top of a planned car plant in the U.S. state of Indiana next year, Tokyo-based Honda said on Wednesday it would build a second, 120,000 units-a-year factory in Thailand for 6.2 billion baht ($200 million), beginning production in the latter half of 2008.

The factory, to be built next to an existing site in Ayutthaya province, would double capacity in that country, supplying markets in the Asia-Pacific region.

Tatsuhiro Oyama, chief executive of Bangkok-based Asian Honda Motor Co., told a new conference in Bangkok that at least half Honda's Thai car production from 2008 would be for export.

"The political situation in Thailand may have been relatively volatile in recent years, but we remain confident in undertaking further investment in this country," Oyama said.

In contrast with the healthy sales overseas, Honda, along with rival automakers, has been hit by a slump in the domestic Japanese market, where consumers are shifting towards low-priced 660cc minivehicles.

In response to that trend, Honda said it would aim to strengthen its minivehicle business by boosting manufacturing and logistics efficiencies. To that end, minivehicle and components subsidiary Yachiyo Industry Co. (7298.Q: Quote, Profile, Research) will buy land adjacent to its car assembly site in western Japan, partly to set up a new engine factory to supply the car plant.

At the higher end of the market, Honda had planned to launch its premium Acura brand in Japan in late 2008, but said it would delay that by two years in light of the market's weakness.

"I don't expect a big change in this tough environment," Chief Executive Takeo Fukui told a mid-year news conference.

Honda's domestic sales, excluding minivehicles, fell 5.6 percent in the first half of 2007, although that was better than the market's 10.5 percent drop. The automaker said on Wednesday it would remodel its top-selling Fit subcompact this autumn, in addition to the planned revamp of the Accord sedan.

VIETNAM, CHINA

In other areas, Honda, the world's biggest motorcycle maker, will build a $65 million motorcycle factory in Vietnam with annual output capacity of 500,000 units, while expanding a factory in Brazil by 11 percent to 1.5 million motorcycles annually by the year-end.

Honda also confirmed that Guangzhou Honda, its joint venture in China with state-run Guangzhou Automobile Group Co., would set up a new R&D centre to develop cars under the venture's original brand, with a target to start sales in 2010.

Guangzhou Honda will spend 2 billion yuan ($264 million) on the facility, complete with a high-speed test course, and will become the first foreign car venture to develop a separate brand. The venture has also received government approval to produce engines, Honda said.

For Japan, Fukui unveiled plans to build a new motorcycle research and development centre in Tochigi Prefecture and launch a clean diesel car, after a planned U.S. roll-out in 2009.

On Tuesday, Honda said it would invest $100 million for a 30,000 units-a-year car plant in Argentina to begin production in the second half of 2009. It also announced plans to build a headquarters and factory in the U.S. state of North Carolina to produce jet engines from late 2010.

(Published by Reuters, July 18, 2007)